Kensington Swan's view on aspects of the construction industry

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Last week the Court of Appeal released their decision for the case of Invercargill City Council v Southland Indoor Leisure Centre Charitable Trust. This case arose from the collapse of the roof of the Invercargill community courts in 2010. The Trust, who owns the building, claimed the Council was negligent in issuing a code compliance certificate for the building. The certificate of compliance had been issued by the Council despite the fact the building was not up to the standards of the Code.

The cause of action in cases involving negligent certificates is negligent misstatement which requires proof that the certificate was relied on by the claimant. It was the only cause of action in this case as other actions by the Council, for which negligence might have been claimed, were time-barred.

Previous cases have held that there is a general duty of care owed by local authorities to building owners for consenting, inspection and certifying. Therefore, the case might have been quite straightforward. However, the court rejected Trust’s claim in negligent misstatement against the Council.

This was based on three main reasons:

1. It is not fair, just or reasonable to impose liability on the Council in a situation where the owner’s own negligence, or the negligence of their contractors has been the cause of loss.

2. The Council would not have expected the Trust to rely on the certificate. The Trust assumed direct control of the construction through professional third parties and the Trust knew that the Council relied on these experts not the Council’s own inspections.

3. The Trust relied on their own experts and was indifferent to the certificate of the Council.

The important thing to note from this case is that a council’s liability for negligent certificates is limited in scope and will not extend to the situation where the owner, or their contractors, is the true cause of the defect. In other words, a Council certificate of code compliance is not an indemnity against defects.